Completing Form 1040X to Correct Tax Return Errors

Making Changes on your Personal Tax Return

Tax forms with broken pencil
•••

Robert D. Barnes / Getty Images

You've filed your Schedule C for your small business taxes along with your personal tax return, but you've discovered a mistake. What do you do?  You will need to file an amended Form 1040, known as Form 1040X. 

Schedule C is the most common tax schedule for self-employed small business owners. It's used as an example here. The process of correcting your tax return works the same way for other business and personal tax errors.

How Form 1040X Works

When you file Form 1040X, it becomes your new tax return for that year. The entries you make on Form 1040X change your original return to include new information.

You must have filed your original tax return before you can file Form 1040X. If you haven't filed, Form 1040X isn't necessary. You can just make the corrections on your original form. Make sure you've received confirmation from the IRS that they've received your Form 1040 before you submit an amended form.

When to File Form 1040X

If you want a credit or refund, you must file Form 1040X within three years (including extensions) from the date you filed your original return or within two years from the date you paid the tax, whichever is later. 

If you received an IRS notice. You may have received a notice from the IRS letting you know about an error on your return or that you didn't report income. Your first priority is to find out what happened and make the correction. Note the deadline for response on the notice!

If you find out you missed a credit or deduction, you'll want to file Form 1040X to get the credit or refund. You might have missed a tax loss carryback for your business, a disaster casualty loss, or a refund for a deceased taxpayer, for example. The IRS has specific qualifications and limits for these and other types of errors. 

Types of Mistakes

If you made just a small mistake, you don't have to go to the trouble of filing an amended return. The IRS will fix basic math errors and it will contact you to tell you if you forgot to include a form or schedule. You can just send in the missing form at that time.

You do have to amend your Schedule C to correct your business income, deductions, or credits, however.  It's also a good idea to file an amended return if you missed something significant, like Part IV- Information on your vehicle.

Correcting Errors on Schedule C 

Amending an incorrect Schedule C and sending the changes to the IRS is a two-step process. First, you must make the changes to Schedule C, and this means preparing a new one. You don't have to mark it as amended in any way, and there's no additional special form for this.  

Recalculate everything on Schedule C after you've made the changes. For example, if you corrected your cost of goods sold, this will affect your total for net income. Now you can transfer the accurate information from your new Schedule C to your personal 1040. 

The IRS suggests that the easiest way to figure the entries for Form 1040X is to make the changes in the margin of the original tax return and then transfer the numbers to Form 1040X.

Transfer Schedule C Changes to Your Tax Return

The most important thing to remember about completing Form 1040X is that you are only including information about changes. You're not repeating everything from your original Form 1040.

When you have figured out the error, it's time to complete the main part of the form.

Each line on the form corresponds with a line on your Form 1040. The columns look like this:

A. Original amount reported or as previously adjusted

 
B.. Net change – amount of increase or (decrease)  C. Correct amount


 

The lines on Form 1040X are totals from different sections of your original 1040. For example, line 1 Adjusted gross income, is a calculated amount from your original return. Your Schedule C income is included in, combined with other income types, and added to Form 1040 on line 7a.

Here's a more detailed step-by-step way to get the change from Schedule C to your 1040X form:

  1. Enter the total net income from your recalculated Schedule C into Schedule 1 of Form 1040 line 3 Business income or (loss). Add it to the information you already have in other lines of Schedule 1 to get a total in line 9.
  2. Put this new total from Schedule 1 on Form 1040, line 7a.
  3. Go back to Schedule 1 and review adjustments to income to see if anything changed as a result of your changes to Schedule C. Re-add the adjustments and get a total on Line 22.
  4. Put this new total on Form 1040 line 8a.
  5. Recalculate the totals on Form 1040, making sure that you include all changes. Line 8b on Form 1040 is your adjusted gross income for Line 1 of Form 1040 X.
  6. You will have to get the original amount of adjusted gross income from the tax return you already filed. Enter it in Box A of Line 1.
  7. Enter the total changes to adjusted gross income in Box B.
  8. Box C is Box A plus Box B if income increased, or Box A minus Box B if income decreased.
  9. Go to Line 18 of Form 1040X and recalculate the change in the tax you owe or the amount of your refund.
  10. Finally, go to Part III and explain the changes you made. Attach Schedule C or other forms you changed.

If you're using personal or business tax preparation software, check to see if it includes Form 1040X. Most of the major software programs have this form and they will walk you through the process of making changes.

Correcting the Self-employment Tax Calculation

Don't forget about self-employment taxes.If your error in your Schedule C affected your business net income calculation, you will have to change the self-employment tax calculation on Schedule SE. Go through the same process for this form as you did for the Schedule C and make the changes on your 1040X form.

How to File Form 1040X - And Pay

You must send the return and your amended Schedule C to a specific location depending on the reason you're submitting it and where you live. You can't e-file. See the Instructions for Form 1040X for details and a list of addresses.

You can also send your amended forms by private delivery service. A list of these services is also included in the instructions. 

Filing Form 1040X doesn't include paying any tax due. If your error results in additional tax due, be sure to pay as soon as possible to avoid fines and penalties on the unpaid balance. You can include a check or money order when you file the form. You can also use one of the IRS-approved payment options. 

Your changes to Form 1040X might result in interest and penalties if you underpaid your taxes based on your inaccurate Form 1040. But don't include any interest or penalties on Form 1040X. The IRS will calculate these amounts if they apply and send you a bill.  

Disclaimer: The information in this article is a general overview. It's not intended to be tax or legal advice. Form 1040X is a complicated form. Get help from your tax professional to make sure you are correctly completing this form.

Article Sources

  1. IRS. "Instructions for Form 1040X Amended U.S. Individual Income Tax Return." General Instructions. Page 3. Accessed Feb. 12, 2020.

  2. IRS. "Instructions for Form 1040X Amended U.S. Individual Income Tax Return." When to File. Page 3. Accessed Feb. 12, 2020.

  3. IRS. "Instructions for Form 1040X Amended U.S. Individual Income Tax Return." Special Situations. Pages 4-7. Accessed Feb. 12, 2020.

  4. IRS. "Instructions for Form 1040X Amended U.S. Individual Income Tax Return." General Instructions. Page 3. Accessed Feb. 12, 2020.

  5. IRS. "Instructions for Form 1040X Amended U.S. Individual Income Tax Return." Where to File. Page 18. Accessed Feb. 12, 2020.

  6. IRS. "Instructions for Form 1040X Amended U.S. Individual Income Tax Return." Line 20 – Amount You Owe. Page 16. Accessed Feb. 12, 2020.

  7. IRS. "Instructions for Form 1040X Amended U.S. Individual Income Tax Return." Interest and Penalties. Page 3. Accessed Feb. 12, 2020.

  8. IRS. "Instructions for Form 1040X Amended U.S. Individual Income Tax Return." Purpose of Form. Page 3. Accessed Feb. 12, 2020.